Outlook for Manufacturers in 2013

Work with your suppliers, reap the benefit.

A solid working relationship with your suppliers is essential to your business success. Assessing your risks is also good for business. But is your organization fully engaged in these business practices?

Last November, ASQ conducted its third annual Manufacturing Outlook Survey, which received more than 1,250 responses from manufacturing professionals around the world. The survey concentrated on two areas of concern: supply chain management and financial outlook.

Supply chain is tricky business. All stakeholders need to be working together, communicating issues, risks and successes. The 2013 Manufacturing Outlook Survey discovered a possible discrepancy. While more than 75% of suppliers are confident in their ability to meet their customers’ needs in 2013, 33% of respondents anticipate a problem with a supplier next year, resulting in a shortage of parts or services. Another 30% aren’t sure if they’ll have a problem with their suppliers.

Of the respondents who anticipate a problem with a supplier, 42.1% said they are working with partners on process improvements to mitigate volume capacity, while more than 26% are working with their suppliers’ competitors. Other manufacturers said they are stockpiling parts in advance of the issue and expanding facilities to make necessary parts themselves.

“Any shortage of parts or services can have a dramatic effect on a manufacturer, so it’s important for companies to communicate openly with suppliers to avoid any disruption in production,” says Dick Gould, ASQ Fellow and supplier management trainer and consultant. “Conversely, it’s important to suppliers to work with manufacturers to provide them with the quality parts or services to ensure a long-term relationship.”

In addition to questions about their organization’s supply chain, the Manufacturing Outlook Survey also questioned respondents about their financial outlook for 2013. The results were nearly identical to last year’s responses.

Nearly 65% of respondents said they anticipate an increase in revenue in 2013, and 70% said they experienced revenue increases in 2012.

In comparison, and in the survey conducted last year in anticipation of 2012, 66% of respondents expected revenue growth in 2012 and 70% of respondents last year said they experienced revenue growth in 2011. While it’s encouraging to see such optimism in manufacturers about their outlook, it’s essential to anticipate risks to keep revenue projections on target.

Of the survey respondents, more than 60% said their organization has a formal process in place to address supply chain risk. Nearly 28% said they don’t have a process in place. This could be a big problem.

“It’s important to have a thorough and formal process in place to address supply chain risk,” says Gould. “Put in place the pieces needed to continue operations in the event of a sudden disruption in supply chain and know the process.”

To ensure continuous operations and to alleviate supply chain disruptions, respondents said manufacturers should keep all options open and make sure to have a back-up plan for catastrophic events. Other respondents said working hard to keep suppliers informed was key, while others advised manufacturers to work closely with suppliers to mitigate disruptions.

This is plenty to consider, so the choice of supplier is key. Survey results show the quality of materials is the most important feature a supplier can ensure. Quality trumps availability, price and customer service when manufacturers consider suppliers.

According to the results, 81% of respondents have a favorable view of the quality of the parts they receive from suppliers. Similarly, 80% of respondents said they are content with the availability of parts, whereas 67% said they are satisfied with the price of the parts and services provided by a supplier.

With a month of 2013 already in the past, there is no better time to make sure you have communication lines open and a solid process in place with your suppliers. The future isn’t certain but mitigating risks will help improve your supply chain and your opportunities for a more profitable year.

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